Throughout the majority of 2019, many cannabis stocks had a disappointing time due to sector-wide issues, but things have started to look up a bit over the past few weeks. One of the stocks that have now come into sharp focus is that of HEXO stock, which has jumped as much as 50% over the course of the past week.
Sudden Buying Across the Board
The entire sector gained on Wednesday after it emerged that a bill has been introduced in the US House of Representatives that seeks to allow hemp-based CBD products to be sold as dietary supplements. It is a major development, and the price action in cannabis stocks was not a surprise.
HEXO Corp (TSX:HEXO) (NYSE:HEXO) gained 17% on Wednesday on the back of that positive news. The stock is up another 5% this morning at $1.95 on the NYSE.
While it is true that HEXO stock lost as much as 54% in 2019, it should be noted that the stock has bounced back recently, as mentioned above. In addition to that, there are other factors that need to be considered, as well. The company has been quite relentless in its zeal to tie up deals.
While HEXO boasts of production capabilities of 150,000 kilos per year, it has also signed a five-year supply agreement with its home province of Quebec to supply 200,000 kilos of cannabis. The acquisition of Newstrike Brands and the extraction deal with Valens (TSXV:VLNS) (OTCQX:VLNCF) are also being seen as major positives.
Lastly, HEXO launched a cannabis beverage joint venture named Truss with Molson Coors Beverages (NYSE:TAP), which could help the company find a foothold in the cannabis derivatives space. However, it should be noted that despite investing a lot in derivatives, the company has still not seen any return on it.
HEXO has also had to idle one of its plants due to current market conditions. Oversupply has also hit the company hard, and it will take some time before these issues can be resolved. Hence, experts believe that a lot needs to go right for HEXO stock to gain in 2020.
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